Fiat Suspends New Investments in Italy Because of Europe Crisis

Fiat SpA (F) Chief Executive Officer Sergio Marchionne temporarily stopped new investments in Italy as Europe’s debt crisis causes sales in the region to plunge.

“For the time being, the economic crisis and current difficulties in the European auto market prevent the company from being able to give any indications concerning future investments,” the Italian carmaker said today in an e-mailed statement, adding that Fiat will give its new plan for Italian factories at the end of October, when it will releases third-quarter results.

Marchionne, who has been spearheading an industrywide effort to cut excess assembly lines in Europe, has vowed to close a second Italian factory, after shuttering one last year, unless he finds a way to export cars to the U.S.

European auto sales are set to fall for a fifth straight year as high unemployment and the region’s sovereign debt crisis causes consumers to hold back from making big ticket purchases. Capital spending at Chrysler Group LLC, which Marchionne also runs, will rise to $4 billion this year from $3.1 billion in 2011, while Fiat is reducing European investment by 500 million euros in 2012.

“Difficult conditions persist in the European auto market, particularly in Italy where demand is approaching the lowest level since 1979,” Fiat said in the statement. “Certain peers who are still heavily exposed to the European market are experiencing significant losses and have even had to announce plant closures.”

PSA Peugeot Citroen (UG), Europe’s second-largest carmaker, announced last month plans to close a French factory and eliminate a total of 16,000 jobs. That follows an announcements from General Motors Co. (GM) that the American automaker plans to shut a German plant.

Temporary Layoffs

Fiat said today it’s focused on temporary layoffs to reduce costs during the crisis as opposed to permanent job cuts. Italy’s biggest manufacturer confirmed it will complete investments at plants in Grugliasco for a new Maserati sedan, in Modena for the Alfa 4C sportcar and in Pratola Serra for engines

“Marchionne told us he suspended new investments in Italy, including the ones at Mirafiori,” Eros Panicali, a leader of the Uilm metalworkers union, said in a phone interview after meeting the CEO today. “We will meet again in a couple of months to get a clearer picture.”

Fiat has plans to build at least two new models at its Mirafiori plant in Turin. The Italian carmaker said in February it will make a new Fiat car at the plant beginning at the end of next year and a Jeep model starting in 2014 as it aims to assemble 280,000 cars a year at its oldest facility.

-- Editors: Chad Thomas,Heather Harris.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net;

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net;

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